2016/7 Common Tax Regulations Involving All Companies Fall Within Law No 6728

6.9.2016

“Law On Making Amendments on Some Laws For the Improvement of the Investment Environment” No 6728 has been published in the Official Gazette No 29796 dated 09.08.2016.

Abstract

The aforementioned Law is comprised of 77 articles and 1 temporary article, and amendments are made in the Laws mentioned below.

​Enforcement and Bankruptcy Law no 2004, dated 09/06/1932

Passport Law no 5682

Law on Collection Procedure of Assets no 6183

Outlay Taxes Law no 6802

Income Tax Law no 193

Tax Procedural Law no 213

Stamp Tax Law no 488

Law of Fees no 492

Real Estate Tax Law no 1319

Municipal Income Law no 2464

Value Added Tax Law no 3065

Electronic Signature Law no 5070

Social Security and General Health Insurance Law (SSL) no 5510

Corporate Tax Law no 5520

Law on Supporting Research, Development and Design Activities no 5746

Check Law no 5941

Turkish Commercial Code no 6102

Law on Financial Leasing, Factoring, and Finance Companies no 6361

Common Tax Regulations Involving All Companies

1) As per the amendments that are made on articles 1, 2, 3, 4, 5, and 6 of the Law, as well as the Enforcement and Bankruptcy Law no 2004,

​Equity firms or cooperations that previously benefited from the suspension of bankruptcy, cannot request for suspension of bankruptcy until 1 year passes after the suspension period ends, including the extension period.

Creditors will be able to object within the 2 weeks of peremptory term following the declaration of the request for suspension of bankruptcy in the trade registry, and file and appeal for the court’s refusal of the request on the grounds that conditions for suspension of bankruptcy do not exist.

The firm or the cooperative may submit a revised improvement project, for one time only, at the time of the suspension trial.

Suspension of bankruptcy can be extended for 1 year by a court decision.

A trustee reports to the court by the end of each trimester within a calendar year regarding whether the firm has demonstrated improvement in accordance with the project.

Through his/her report, the trustee may ask for the bankruptcy of the firm without waiting for the suspension period.

​Against the final decisions issued by the court upon the request for suspension of bankruptcy, the debtor firm/cooperative or the creditor that requested suspension can go to appeal within 10 days following the notification of the decision, while the other people it may concern can go to appeal within the announcement of the decision.

Concordat practice has been strengthen in a way that protects the debtor.

Regulations for suspension of bankruptcy and concordat will be enforced as of the enforcement date of the Law.

2) The expenses regarding heat insulation and energy conservation that have the quality of increasing the economic value of the real estate property that is part of the companies’ assets, can be recorded as expenditure directly in the year it was spent.

The paragraph 7 of the article 40 titled “Expenses to Reduce” of the Income Tax Law no 193 accepts the deduction of the amortization allocated according to the provisions of the Tax Procedural Law in the determination of the tax base , and according to the article 14 of the Law, with the bracketed provision that is added to the aforementioned regulation, the expenses regarding heat insulation and energy conservation that have the quality of increasing the economic value of the real estate property that is part of the companies’ assets , can be recorded as expenditure directly in the year it was spent. With the aforementioned bracketed regulation, right of choice was given to the taxpayer through allocating amortization or through directly recording it as expenditure.

3) The monthly premium and service document that should be given as per the Social Security and General Health Insurance Law will be combined and submitted with the withholding tax return.

With the article 16 of the Law, the 98/A article titled “Witholding Tax Return and Premium Service Declaration” is added, provided that it comes after the article 98 titled “Time of Withholding Tax Return Submission” of the Income Tax Law no 193.

With the aforementioned regulation, the withholding tax return that should be submitted in compliance with the tax laws, and the monthly premium and services document that should be given as per the Social Security and General Health Insurance Law no 5510 are combined, it will be possible to post the total of the insurance premiums and incomes of the insured, as well as the number of premium payment days using the deducted tax assessments.

The Ministry of Finance and the Ministry of Labor and Social Security are jointly authorized to impose and remove obligation to give the summary declaration in combination with the monthly premium and service document, to determine what will be included in the coverage individually or together in terms the groups, industries, gross business revenues, number of employed workers, income elements, city and county borders, to determine the form, content and appendixes, as well the relevant term and the implementation-related procedures and principles of the withholding tax return and premium service declaration.

4) The accrual slip prepared about the combination of monthly premium and service document that should be given as per the withholding tax return and Social Security and General Health Insurance Law will be delivered to the taxpayer or electronically to the real or legal person who has the authority to submit statement.

According to the article 18 of the Law, with the paragraph that was added to come after the 2nd paragraph of article 28 titled “The Submission of Tax Declaration By Mail or Electronically” of the Tax Procedural Law no 213, the accrual slip prepared about the combination of monthly premium and service document that should be given as per the withholding tax return and Social Security and General Health Insurance Law will be delivered to the taxpayer or electronically to the real or legal person who has the authority to submit statement.

5) The monthly premium and the service document that should be given as per the Withholding Tax Return and the Social Security and General Health Insurance Law, will be submitted in combination, and those who do not comply with this aforementioned obligation will be charged with special irregularity fine. Furthermore, in the event of failure to electronically submit the statement or the form, and of electronic submission of the statement or forms within 3 days following the determined deadline, the special irregularity fine will be applied at a rate of 1/10.

According to the article 21 of the Law, the title of the article 355 titled “Fine for those who abstain from furnishing information, and those who do not comply with the provisions of articles 256, 257, and the repeating 257” of the Tax Procedural Law no 213 has been replaced with the title “Fine for those who abstain from furnishing information, and those who do not comply with articles 256, 257, repeating 257, and the article 98/A of the Income Tax Law.”

On the other hand, the “with the obligations stipulated by the repeating article 257” phrase is replaced with “with the obligations stipulated by the repeating article 257 and the article 98/A of the Income Tax Law.”

Accordingly, those who do not comply with the submission of summary declaration in combination with the monthly premium and service document as per the article 98/A of the Income Tax Law, will be subject to special irregularity fine.

Furthermore, the following sentence is added to the beginning of the regulation that stipulates that

“In the event that the declarations and forms that are submitted as corrections after the deadline regarding the declarations or forms that are mandated to be submitted electronically are submitted within 10 days following the determined deadlines, no special irregularity fine is applied; in the event that they are submitted within the following 15 days, the special irregularity fine at a rate of 1/5 id applied.”

in the 6th paragraph of the relevant article that says that

“The special irregularity fine that should be applied in the event of failure to electronically submit the statement or the form, will be applied at a rate of 1/10 in the event of electronic submission of the statements or forms within 3 days following the determined deadline.”

In this regard, in the event of failure to electronically submit the statement or the form, and of electronic submission of the statement or forms within 3 days following the determined deadline, the special irregularity fine will be applied at a rate of 1/10.

6) The delivery of the application documents regarding the initiation of a job to the tax office can now be made in writing or electronically.

According to the article 19 of the Law, the expression “30.” is replaced with “27.” in the phrase that takes place in the second paragraph of the article 153 titled “Notification of Job Initiation” of the Tax Procedural Law no 213, that says,

“Trade registry offices forwards to the relevant tax office a copy of the application documents of the taxpayer who is a taxpayer of corporate income tax, and applied for registration as per the article 30 of the Turkish Commercial Code . These taxpayers are considered to have met their obligations to notify job initiation. The trade registry officers who do not fulfil their notification obligation timely, will be subjected to the provisions of irregularity fine regarding notification of job initiation.”;

and in addition to that, the phrase “in writing or electronically” is added to come after “to the tax office.” In this regard, the delivery of a copy of the application documents regarding the initiation of a job to the tax office can now be made in writing or electronically.

Additionally, at the end of the regulation,

the regulation “the procedures and principles regarding the electronic delivery of the application documents are determined jointly by the Ministry of Finance, and Ministry of Customs and Trade.”

is added.

7) The “Invitation to Commentary” practice as a new application is brought.

The former article 370 of the Tax Procedural Law no 213 is regulated along with its title.

According to this regulation with the title “Invitation to Commentary”,

- Regarding the pre-determinations that were done by relevant bodies to see whether the tax has suffered any losses prior to starting a tax audit or prior to sending it to the valuation commission, the taxpayers can be invited to comment, provided that there was no denunciation until the date of determination.

- The taxpayers who were served an invitation to commentary cannot take advantage of the provisions of regret of the Tax Procedural Law, provided that it is limited to the determination that is the subject of invitation.

- In the event that no commentary is made within 15 days following the notification date of the invitation to commentary,

a- In the event that following the comments made by the taxpayers it is understood by the Administration that a tax loss was not caused, the taxpayers will not be subjected to tax review regarding the relevant determination, or they are not sent to the valuation commission.

b- The tax loss fine is imposed at a rate of 20% over the tax that has suffered a loss, provided that, within 15 days following the comments of the taxpayers, the non-declared tax returns are declared, the incomplete or faulty tax returns are completed or corrected, and the taxes that are long due are paid along with a raise at the rate of a late fee to be applied to the extent that is stated in the article 51 of the Law no 6183 for each late month and its fraction. This situation does not constitute an impediment to the conduct of a tax audit, and an additional assessment.

- In the event of the commitment of the deeds that are stated in the article 359 titled “Tax Evasion and Its Penalties” of the Tax Procedural Law, the invitation to commentary provisions are not applied; and provided that the amount of fake documents with fallacious content does not exceed 50.000 TRY per document, and that the total purchase of goods and services of the taxpayer within the relevant year does not exceed 5% in the pre-assessments conducted regarding whether fake documents with fallacious content are used, the taxpayers can be invited to commentary. The relevant amount is applied at the rate of revaluation that is determined as per the Law every year with regards to the previous year.

- The Ministry of Finance is authorized to determine the characteristic of the pre-assessment, the form and scope of the invitation to commentary, the body that will send the invitation, the invitees, information and documents to be used during the commentary, as well as the procedures and principles regarding the application.

8) Tax Procedural Law Article 153/A’s 10th paragraph is abolished. Therefore, the practice of not allowing for benefiting from tax incentives and supports due to a set of committed or participated deeds, has been terminated.

The article 20 of the Law, as well as the paragraph 10 of the article 153/A of the Tax Procedural Lax no 213 has been abolished. The abolished paragraph was regulating the 6-year banning of benefiting from tax incentives and supports due to a set of committed or participated deeds. The abolishment of this paragraph has paved the way for the taxpayer in this situation to benefit from the tax incentives and supports.

9) The regulations that are made in the Stamp Tax Law are as follows:

- The practice of charging each copy of documents that are subject to the graduated stamp duty with stamp duty has been abolished, and now only 1 copy will be charged with stamp duty.

- In the event that there is more than one ordinary guarantee and guarantee commitment on a document, only one copy of them will be charged with stamp duty, separately.

- Stamp duty shall not be charged to commitments like retainer, forfeit money, deduction from wage, penalty which are in nature of sanction of a contract unless they are subject of a contract on their own.

- In the event only cost increases without modification to other provisions of contracts where stamp duty is charged on maximum amount, stamp duty shall not be charged for increased amount.

- The authority of reducing proportional taxes to levels prior to increase which is included among authorities of the Cabinet of Ministers is changed as the authority to reduce proportional taxes to zero individually or jointly as per paper types.

- Stamp duty exemption regulation at papers issued in relation with transactions regarding foreign currency gaining operations is regulated by detailing in items on the basis of transactions under regulations set forth at the Communiqué published by Treasury Undersecretariat, and description of international tender which was not included in Public Tender Law and other laws was made.

- With parenthetical provision added to clause no. (2) of section entitled “II. Resolutions and Mandates” of Table no. I. annexed to Stamp Duty Law, in the event of complaint to agencies and organizations under Public Tender Law no. 4737 or objection and complaint to Public Tender Law or if a tender is cancelled with a court decision , stump duty corresponding to the part not benefiting from provision of such tender resolution shall be rejected or refunded. - However, in the event contract has been issued, stamp duty related to the contract shall not be rejected or refunded.

- With regulations made at the section entitled “IV. Receipts and other papers” of Table no. I. annexed to Stamp Duty Law, stamp duty shall not be charged to returns submitted for the purpose of correction within return submission period, also stamp duty amounting to TRY 37,40- shall be paid for returns created by combining and submitting monthly premium and service document which must be submitted as per Social Insurances and General Health Insurance no. 5510 and withholding tax return.

For the purpose of ensuring promotion and marketing of products abroad, arranged papers related to free of charge export of products for promotion purposes or demonstration materials, sample products quantity of which conform to commercial practices as well as arranged papers for the purpose of participation to international fairs were taken into scope of stamp duty exemption.

Stamp duty exemption is provided to papers issued between investors holding investment incentive certificate regarding investment goods included in the scope of investment incentive certificate and manufacturers and suppliers of such goods; papers issued for renting and purchasing intangible rights like patent, know-how used for production of goods or provision of services related to investments under certificate in exclusive investment period; contracts, letter of undertakings, warranties and such papers issued between investors holding incentive certificates for manufacture and construction of fixed asset investments in the scope of certificate and those who perform such job; papers issued regarding advisory and technical consultancy services to be provided to investors holding incentive certificate for the investments in question.

For the purpose of cutting costs in manufacture of high and medium-high tech industry products determined with resolutions about State assistance in investments and to boost international competitive power, stamp duty exemption is provided to papers issued between manufacturers and suppliers concerning manufacture of such products.

10) Regulations made In Law of Fees are as follows;

- In notary public transactions, those typed in tariff no. (2) attached to Law of Fees are subject to notary fees, from now on, fee shall be collected for only 1 copy for transactions subject to proportional fee related to papers containing a certain amount issued in several copies.

- In case of changing any bond, contract, papers containing a certain amount subjected to notarial transaction, bonds, contracts and papers shall be subject to same proportion of fee at increased amounts.

- Foundation and capital increases of incorporations, joint stock companies, limited liability and limited partnerships are exempt from duty, share transfers of such companies were taken into scope of fee exemption.

- Transactions carried out for ensuring thermal insulation and energy saving at buildings were taken into scope of fee exemption.

- For the purpose of ensuring promotion and marketing of products abroad, transactions carried out related to no charge export of products for promotion purposes or demonstration materials, sample products quantity of which conform to commercial practices as well as transactions carried out for the purpose of participation to international fairs were taken into scope of fee exemption.

- It was allowed to collect trade register fees by chambers of commerce and industry or chambers of commerce, by chambers to be designated by the Ministry of Customs and Commerce at places with no organization adequate for execution of trade register transactions or with no chamber, in consideration of receipt and in advance.

- Fee exemption regulation in relation with transactions regarding foreign currency gaining operations is regulated by detailing in items on the basis of transactions under regulations set forth at the Communiqué published by Treasury Undersecretariat, and description of international tender which was not included in Public Tender Law and other laws was made.

- Fee exemption was brought for arbitration

- While fees charged for power of attorneys included within fixed fees were collected differently as private (TRY 6,60-) and general (TRY 10,40-) from now on a single fee amounting to TRY 12,40- for each signature at power of attorneys shall be charged.

- No fee shall be charged for book certifications at foundation stage.

​Under article 30 of the Law, with the provision added to clause one of Article 38 of Law on Fees, notary fee shall be charged only for 1 copy for transactions subject to proportional fee related to papers containing a certain amount issued in several copies.

Under article 31 of the Law, the title “Affairs Subject to Side-Fee” of Article 47 of Law on Fees was changed as “Fee in Various Transactions” with the provision added to clause one of such article notary fee shall be charged only for 1 copy for transactions subject to proportional fee related to papers containing a certain amount issued in several copies. Accordingly, an opportunity was provided to charge fee at increased amount, not all of value indicated at papers.

Under article 33 of the Law, The phrase “share transfer” was added following the phrase “due to incorporation.” in Article 123 clause three of Law on Fees ; “Transactions to be carried out due to incorporation, capital increase, merger, transfer, spin-off and type changes of incorporations, joint stock and limited liability companies as well as transactions related to Artisans and Craftsmen Loan and Warranty Cooperatives (warranties to be provided for loans to be caused to be used from banks by such cooperatives and Loan Warranty Fund Operation and Research Inc. included), banks, international loan agencies and international agencies, warranties and repayment of the same (judicial fees excluded) are exempt from fees set out in this Law.” ​

In this scope, foundation and capital increases of incorporations, joint stock companies, limited liability and limited partnerships are exempt from duty, share transfers of such companies were taken into scope of fee exemption.

In the scope article 33 of the Law, following clauses were added following clause four of Article 123 of Law on Fees. ​

- Transactions carried out for ensuring thermal insulation and energy saving at buildings as well as transactions carried out for purchase of new machinery and equipment to be exclusively used at manufacturing industry by industrial enterprises holding industry register certificate as per Industrial Register Law no. 6948 are exempt from fees mentioned at Law on Fees.

- For the purpose of ensuring promotion and marketing of products abroad, transactions carried out related to free-of charge export of products for promotion purposes or demonstration materials, sample products quantity of which conform to commercial practices as well as transactions carried out for the purpose of participation to international fairs are exempt from fees mentioned at Law on Fees.

In the scope of regulation of article 34 of the Law, the following clause is added to article 132 of Law on Fees entitled “Department Authorized to Charge Fees.”

Fees related to trade register transactions set forth at the section entitled “C – Trade Register Fees” of the tariff no. (1) attached to this Law shall be collected by chambers of commerce and industry or chambers of commerce or relevant chambers against receipt in advance. Fees for one month collected in this way shall be reported with a notice form, contents of which is designated by the Ministry of Finance and paid until evening of fifteenth of following month to tax office the chamber containing trade register office is affiliated with respect to withholding. In case of failure to pay fees collected to relevant tax office in due time, fee shall be pursued and collected from relevant chamber as per provisions of law no. 6183. Provisions of Tax Procedure Law no. 213 shall be enforced about amounts not declared to tax office in due time. Officials of trade registers that perform transaction without entirely receiving fees arising from transaction and relevant chambers shall be jointly and severally responsible for payment of fee together with tax-payers.”

​In the scope of regulation of article 36 of the Law, the expression “Fee calculated in arbitration according to this sub-clause shall be enforced at fifty percent ratio” contained at sub-clause (a) of clause one of sub-section entitled “III. judgment and writ fee” of the section entitled “A) Court Fees” of Tariff no. I. is changed as “No fee shall be charged during arbitration in accordance with provisions of this sub-clause.” Accordingly, proportional judgment and writ fee shall not be charged during arbitration.

In the scope of regulation of article 37 of the Law, fees charged for power of attorneys included at clause no. 3 of the section entitled “II. Fixed Fees” of the Tariff no. (2) of Law on Fees were collected differently as private (TRY 6,60-) and general (TRY 10,40-) from now on a single fee amounting to TRY 12,40- for each signature at power of attorneys shall be charged.

Title of clause no. 4 was changed as “4. Book certification (certifications at foundation stage are excluded).” Accordingly, from now on no fee shall be charged for book certifications at foundation stage hence foundation costs of businesses will be reduced.

In the scope of regulation of article 38 of the Law, parenthetical provision added to clause no. (7) of the section entitled “I – Title Deed Transactions” of the tariff no. (4) attached to Law on Fees ensure that 50% of title deed fee calculated for lien transactions established among merchants shall not be charged.

11) Financing services related to bond deliveries have been exempted from VAT.

Within the context of the regulation of Article 43/a, related to the following phrase in Article 17, subsection 4g of VAT law no 3065,

To the VAT exemption regulation, the following phrase in brackets is added, following “bonds” phrase: “(including financing services provided by purchasing bonds, limited to interest income obtained)”.

Accordingly, from now on VAT exemption applied for the delivery of bonds will include financing services, limited to interest income obtained from purchases of bonds. The exemption in question is planned to cover borrowings from group companies which are not banks or finance companies or from 3rd persons, other than banks and finance institutions authorized to extend loans. Thus, because the transactions of banks and finance institutions authorized to extend loans fall within the domain of BITT, these are not in the domain of VAT, as per Article 17/4-e of VAT Law.

12) With the changes made in Social Security and General Health Insurance Law no 5510,

- For the withholding and social security premium declarations which are sent to the Institution in electronic or other environment according to law, the responsible party in case of non-compliance of these information with the books and records and the underlying documents will be jointly and severally; employers and, public accountant, SMMM and YMM who are authorized by agreement.

- Regulations were made regarding merging of Withholding and SGK declarations, in the relevant articles of the Law.

- Related to Withholding declaration and the monthly premium and employment document being delivered as merged, the type, content, attachments, related period, delivery deadline and other issues of this merged declaration will be specified with a joint decree by the Ministry of Labor and the Ministry of Finance. When the employer does not employ social security registered employees any more, it will be obliged to notify this to the Institution, in fifteen days following the case happens.

- Because the monthly premium and employment documents will be delivered to the Ministry of Finance with the withholding declaration instead of Social Security Institution, the fines for employers are specified, in case of delays in premium accruals, not making premium accruals, employment of the social security registered employee not being notified, or notified in delay. Moreover, in case where penalties are applied to the employer due to the detections by the administration or courts, a penalty system in tranches was launched, according to the financial size.

The changes summarized above were made in Articles 47, 48, 49, 50, 51, 52, 53 and 54 of the Law and in Social Security and General Health Insurance Law no 5510.

With the (m) subsection added to Article 102.1 of the Law no 5510 with the Article 51 of the Law, the below mentioned penal obligation was launched.

“In the declaration that has to be submitted according to Article 86 Subsection 13 of this Law which is the basis of premium accruals and social security rights of the social security registered employees, when the earnings or employment as the basis of premiums are not notified, notified in delay or not in full, notified as occupation name and code being wrong, for each business place;

1- When the declaration is the main document, 1/5 of the minimum monthly wage per registered employee in the declaration, not to exceed 2 times the monthly minimum wage,

2- When the declaration is the attachment, 1/8 of the minimum monthly wage per registered employee in the attachment, not to exceed 2 times the monthly minimum wage,

3- When the attachment declaration is prepared directly by the Institution as per Article 86 Subsection five, 1/2 of the minimum monthly wage per registered employee in the attachment, not to exceed 2 times the monthly minimum wage,

4- When it is detected through a court decision, detections by officers authorized by the Institution with audit and control, investigations, audits and inspections by audit staff of other government administrations, or through intelligence and documents obtained from banks, entities of circulating capital, government administrations, entities and institutions which have been established by law, that the employment and earnings not submitted to the institution, not submitted in full, only employment not submitted in full, occupation name and code being wrong, without taking into account whether the declaration is the main declaration or an attachment, or whether or not it has been prepared by the employer, for each business place in the monthly declaration,

a- For government administrations and the ones which have to keep their books on balance sheet basis as per law no 213, monthly minimum wage per registered employee, not to exceed 3 times the monthly minimum wage,

ç- When it is understood that for the declared registered employees of each business place in the declaration only the earning as the basis of premiums are not submitted in full, without taking into account whether the declaration is the main declaration or an attachment, or whether or not it has been prepared by the employer, the amount of full earnings as the basis of premium, minimum being 1/10 of the monthly minimum wage, maximum being 2 times the monthly minimum wage,

are applied as administrative fines.”

13) Sell and lease back transactions and the sale of immovables/participation shares as the subject of lease certificate issues according to Capital Markets Law provisions to third persons by the lessee or source institution have a corporate tax exemption with a two years period condition. In calculating this period, the period which has elapsed while these immovables/participation shares have been among the assets of asset leasing companies, leasing companies, participation banks, development and investment banks will also be considered.

According to Article 56/a of the Law, in Corporate Tax Law no 5520, in Article 5, Subsection (e) titled “Exemptions”, the provision in the brackets in the first paragraph has been deleted, and the fifth paragraph has been amended as follows.

“When calculating the period that has to elapse as assets in case of sales of immovables, participation shares, founder shares, dividend shares which are acquired through company sale or split, the periods elapsed in sold or splitted companies are also considered. Within the scope of the Law on Leasing, Factoring and Finance Companies dated 21/11/2012 no 6361, with the condition that they are acquired back with the purpose of lease back and at the end of the term of the agreement, when the immovables are transferred by entities to leasing companies, participation banks, development and investment banks or to asset leasing companies for lease certificate issuing purposes under Capital Markets Law dated 06/12/2012 no 6362, are sold to third persons by the source institution, when calculating the period elapsed as assets, the period these immovables have been among the assets of leasing companies, interest free banks, development and investment banks are also considered.”

Accordingly, sell and lease back transactions and the sale of immovables/participation shares as the subject of lease certificate issues according to Capital Markets Law provisions to third persons by the lessee or source institution have a corporate tax exemption with a two years period condition. In calculating this period, the period which has elapsed while these immovables/participation shares have been among the assets of asset leasing companies, leasing companies, participation banks, development and investment banks will also be considered.

14) The R&D deduction regulation in the Corporate Tax Law has been removed, and the regulation in question has been included to The Law on Supporting Research, Development and Design Activities no 5746.

To replace the removed regulation, the Article 3/A which follows Article 3 of the Law on Supporting Research, Development and Design no 5746 titled “Other incentive elements” has been included.

15) The R&D deduction regulation in the Income Tax Law has been removed, and the regulation in question has been included to Law no 5746.

Article 89, Subsection (9) of Income Tax Law which regulated R&D deduction has been removed.

To replace the removed regulation, the Article 3/A which follows Article 3 of the Law on Supporting Research, Development and Design no 5746 titled “Other incentive elements” has been included.

16) In transfer pricing, In order for a case to be deemed as disguised profit distribution through direct or indirect shareholder relationship, at least a 10 percent shareholder relationship, voting or dividend rights must be present. In certain circumstances where at least 10 percent direct or indirect voting or dividends rights are present without a shareholding relationship, parties will also be deemed as affiliated. With regards to related parties, mentioned ratios will be considered collectively. Additionally, considering OECD regulations, a new method has been added to transfer pricing methods, as “Transactional Profit Methods”. However, when the method to be applied is agreed between the tax payer and the Ministry of Finance, it is enabled to use this method for also the taxing periods not have been subject to the statute of limitations, with the condition that conditions for settling with regret and adjustment still being valid in the current period. On the other hand, to be applied for tax payers who has carried out their documentation obligation for transfer pricing fully and in time, a 50% discount for tax loss penalties for late accruals or short-coming accruals due to concealed gains distribution is enabled.

With the regulation of Article 59 of the Law, the below phrase has been added to Corporate Tax Law no 5520 Article 13 titled “Disguised profit through transfer pricing”,

Subsection 2.

In order for a case to be deemed as disguised profit distribution through direct or indirect shareholder relationship, at least a 10 percent shareholder relationship, voting or dividend rights must be present. In certain circumstances where at least 10 percent direct or indirect voting or dividends rights are present without a shareholding relationship, parties will also be deemed as affiliated. With regards to related parties, mentioned ratios will be considered collectively

Subsection (ç) is added to Subsection 4.

Transactional profit methods: Refers to the methods based on profits arising from the transactions between related parties in designation of arm’s length price or return. These methods consist of transactional net margin method and profit split method. Transactional net margin method is based on the examination of an established net profit margin realized by the taxpayer resulting from a controlled transaction on certain relevant and appropriate basis such as costs, sales or assets. Profit split method refers to the arm’s length split of total operating margin or loss between related parties realized from one or more related party transactions with regards to the functions performed and risks borne by each part

The below phrase was added to Subsection 5.

“Tax payer and the Ministry may enable that the specified method is also applied to previous taxing periods if they have not become subject to statute of limitations, and if regret and adjustment provisions of VUK is still valid for the current period, by including it in the agreement scope. In this case, the agreement signed stands for notification petition mentioned in the provisions in question, declaration and payment transactions are processed accordingly. Because the agreement had been applied in previous taxation periods, previously paid taxes would not be returned”

Below mentioned Subsection is added, to follow Subsection 7.

“With the condition that documentation obligations related to transfer pricing are carried out fully and in time, the tax loss penalty due to late accrued taxes because of disguised profit distribution, is applied with a 50% discount.”

In Subsection 8, the details of the authority of the Council of Ministers is mentioned in detail.

17) VAT paid during imports or as reverse charge, related to differences occurring as an adverse effect on the entity for disguised profit distribution through transfer pricing, is deducted from the VAT calculated for regular transactions of the tax payer.

With the regulation made in Article 44 of the Law, to the regulation in Article 30 of VAT Law titled “Non-Deductible VAT”, Subsection 1-d as,

“Value added tax paid due to expenses which are not allowed to be deducted during determining income according to Income and Corporate Tax Laws”

the below mentioned provision in brackets was added.

“(Excluding distributed disguised profits according to Article 13 of Law no 5520 and value added tax paid during imports or as reverse charge, related to differences occurring as an adverse effect on the entity according to Income Tax Law Article 41 Subsection (5))”

Accordingly, it was enabled that VAT paid during imports or as reverse charge, related to differences occurring as an adverse effect on the entity for disguised profit distribution through transfer pricing, is deducted from the VAT calculated for regular transactions of the tax payer.

18) It was enabled that the commercial title which will be used by the merchant and the accompanying signature to be approved by the trade registry manager or assistant manager.

The below mentioned phrase is added with Article 66 of the Law to Article 40 of Turkish Commercial Code no 6102 titled “Registry”.

“Real person merchant and the authorized signatory on behalf of the legal person merchant can provide the commercial title and the accompanying signature before the trade registry manager or assistant, by a written representation, without the requirement of public notary approval.”

19) The defunct Article 33 of Income Tax Law is revised with the title “Deductions in Entities Providing Services Overseas”. For items included in Corporate Tax Law Article 10/ğ as “Services provided in Turkey but to non-residents of Turkey, and to persons whom the work premises, legal and operational centers being abroad, and which are being utilized abroad, such as architecture, engineering, design, software, medical reporting, book keeping, call center and data center, and for entities operating in education and healthcare fields subject to related ministry permission and serving non-residents of Turkey”; for the personnel employed by these entities, a tax discount is brought forward for the income tax on wages.

Article 33: Article 89 Subsection 1/13 of this Law and Article 10 Subsection 1/ğ of Corporate Tax Law dated 13/06/2006 no 5520 mentions deductions for certain operating fields. Deductions exclude support personnel, and only can be applied to employees working on the core activities of the entity. Employers, after deducting minimum living allowance and calculating income tax for wages, can deduct an amount from this tax which is calculated by multiplying gross minimum wage of January of the operating year with the rate indicated in Article 103 of this Law for the first bracket of the income tax tariff. This deduction can be applied if the following conditions are met: 85% of the turnover of the employer from these activities must be obtained from abroad, and invoice and similar documents must be issued in the name of customer abroad.

Provided the conditions mentioned in this article are met, this deduction is applied as such: The taxes are paid during the year as of taxation periods, and the annual income or corporate tax declaration is submitted. Following this declaration, the withholding tax declaration for the coming periods are submitted, and the deduction is applied by offsetting with the taxes accruing with these withholding tax declarations.

Council of Ministers is authorized to decrease the 85% rate in this article down to 50% or to increase up to 100%, according to service fields or according to income amounts, separately or jointly. Ministry of Finance is authorized to determine the rules and principles regarding the application of this article.

20) For buildings constructed within the scope of an Investment Incentive Certificate, a temporary real estate tax exemption for 5 years is enacted.

Subsection (g) was added to Article 5 of Real Estate Tax Law with Article 39 of the Law, with this Subsection it is regulated that for buildings constructed within the scope of an investment incentive certificate, a 5 years temporary real estate tax exemption will be applied, starting with the budget year following the finishing of the construction.

21) For land acquired or allocated for investments within the scope of an Investment Incentive Certificate, real estate tax exemption will be applied throughout the investment incentive certificate period.

Subsection (e) to Article 15 of Real Estate Tax Law is added by Article 40 of the Law, with this subsection it is regulated that for land acquired or allocated for investments within the scope of an investment incentive certificate, real estate tax exemption will be applied throughout the investment incentive certificate period.

With the Subsection added to Article 4.1 titled Exemptions of the Corporate Tax Law by Article 55 of the Law, regional management centers are exempted from corporate tax, provided that all their expenses are covered by non-resident entities, and the expenses in question are not transferred to accounts of any tax payer or limited tax payer in Turkey or are not separated from its profit.

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